{"id":84683,"date":"2023-05-08T00:12:38","date_gmt":"2023-05-08T04:12:38","guid":{"rendered":"https:\/\/www.hedgeco.net\/news\/?p=84683"},"modified":"2023-05-07T23:53:40","modified_gmt":"2023-05-08T03:53:40","slug":"investment-adviser-and-fund-trustees-charged-with-liquidity-rule-violations","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/05\/2023\/investment-adviser-and-fund-trustees-charged-with-liquidity-rule-violations.html","title":{"rendered":"Investment Adviser and Fund Trustees Charged with Liquidity Rule Violations"},"content":{"rendered":"\n

(HedgeCo.Net) The Securities and Exchange Commission has announced charges against investment adviser Pinnacle Advisors LLC <\/strong>for aiding and abetting Liquidity Rule violations by a mutual fund it advised and whose Liquidity Risk Management Program it administered. The SEC also charged the fund\u2019s two independent trustees, Mark Wadach and Lawton \u201cCharlie\u201d Williamson, and two officers of both Pinnacle Advisors and of the fund it advised, Robert Cuculich and Benjamin Quilty, with aiding and abetting Liquidity Rule violations by the fund. A third trustee, Joseph Masella, agreed to settle charges that he caused and willfully counseled the fund\u2019s violations.\u00a0<\/p>\n\n\n\n

The action is the first-ever case enforcing the Liquidity Rule, <\/strong>which prohibits mutual funds from investing more than 15 percent of their net assets in illiquid investments, requires funds to take certain prompt remedial steps if they hold illiquid investments above this percentage limit, and requires funds to adopt a liquidity risk management program to assess their liquidity risk.<\/p>\n\n\n\n

The SEC\u2019s complaint alleges that, from June 2019 to June 2020, the fund held approximately 21 to 26 percent of its net assets in illiquid investments. According to the complaint, Pinnacle Advisors and its officers, Cuculich and Quilty, classified the fund\u2019s largest illiquid investment as a \u201cless liquid\u201d investment, ignoring restrictions, transfer limitations, and the absence of any market for the shares, and disregarding the advice of fund counsel and auditors. The SEC alleges that Pinnacle Advisors and its officers did not present the fund\u2019s board with a plan to reduce the fund\u2019s illiquid investments to 15 percent or lower or make required filings with the SEC, as required by the Liquidity Rule. The complaint also states that Cuculich, Quilty, and Masella misled the SEC\u2019s Division of Investment Management about the basis for the fund\u2019s liquidity classifications. According to the complaint, the fund\u2019s board had oversight responsibilities regarding the fund\u2019s Liquidity Risk Management Program, and Wadach and Williamson, who knew that the shares were restricted and illiquid, aided and abetted the fund\u2019s violation by recklessly failing to exercise reasonable oversight of the fund\u2019s program.<\/p>\n\n\n\n

“The Liquidity Rule provides substantive protections to shareholders of open-end funds,” said Sheldon L. Pollock, Associate Regional Director in the SEC\u2019s New York Regional Office. “Trustees must exercise oversight on behalf of shareholder interests, and the Commission will hold trustees accountable when they fail to fulfill the most basic requirements under the applicable rules.”<\/p>\n\n\n\n

The SEC\u2019s complaint seeks permanent injunctions and civil money penalties. The fund is now a liquidating trust and is not separately charged.<\/p>\n\n\n\n

Without admitting or denying the SEC\u2019s findings, Masella consented to an order requiring him to cease and desist from violations of the Liquidity Rule and pay a civil penalty of $20,000, and suspending him from association with any investment adviser, registered investment company, and others for six months.<\/p>\n\n\n\n

The SEC also announced charges against Pinnacle Investments LLC, an affiliate of Pinnacle Advisors, for making false and misleading statements in its Form ADV brochure regarding reviews of advisory client accounts and failing to disclose certain conflicts of interests, adopt and implement related policies and procedures, and deliver to clients required information about advisory personnel. Without admitting or denying the SEC\u2019s findings, Pinnacle Investments consented to an order requiring it to cease and desist from violations of the antifraud and other provisions of the Investment Advisers Act of 1940, a censure, and disgorgement and a civil penalty totaling approximately $476,000.<\/p>\n","protected":false},"excerpt":{"rendered":"

(HedgeCo.Net) The Securities and Exchange Commission has announced charges against investment adviser Pinnacle Advisors LLC for aiding and abetting Liquidity Rule violations by a mutual fund it advised and whose Liquidity Risk Management Program it administered. The SEC also charged […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,3,16048],"tags":[],"class_list":["post-84683","post","type-post","status-publish","format-standard","hentry","category-hedgeco-networks-press-releases","category-hedgeco-news","category-hedgecovest-news"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/84683","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=84683"}],"version-history":[{"count":1,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/84683\/revisions"}],"predecessor-version":[{"id":84684,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/84683\/revisions\/84684"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=84683"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=84683"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=84683"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}